ES Risks and Shareholder Voice

67 Pages Posted: 26 Nov 2018 Last revised: 29 Sep 2020

See all articles by Yazhou He

Yazhou He

University of Manchester

Bige Kahraman

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR)

Michelle Lowry

Drexel University; European Corporate Governance Institute (ECGI)

Date Written: September 1, 2020

Abstract

While shareholder proposals related to ES issues nearly always fail, we show that investors’ support for these proposals contains information regarding future risks that firms face. Support levels are informative regarding the probability of negative tail returns that stem from future ES incidents. Examining the economic channels underlying this finding, we find that agency frictions contribute to proposal failure, leading to predictable tail events. Contrasting ES versus non-ES failed proposals within the same firm, we find that predictability is unique to ES initiatives; this is consistent with higher uncertainty regarding the value of ES initiatives exacerbating agency frictions.

Keywords: shareholder proposals, voting, mutual funds, environmental, social

Suggested Citation

He, Yazhou and Kahraman, Bige and Lowry, Michelle B., ES Risks and Shareholder Voice (September 1, 2020). Available at SSRN: https://ssrn.com/abstract=3284683 or http://dx.doi.org/10.2139/ssrn.3284683

Yazhou He

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Bige Kahraman

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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